Microgrid becomes popular option

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Since February, Tarsia's garage has housed a suitcase-sized battery that stores power from her rooftop solar panels and the main electrical grid. In a blackout, the battery can power her home for days or even weeks.

“I think about what will happen in a big earthquake and what happened in Japan with the tsunami,” said Tarsia, who paid $5,000 to get the battery installed. “I wanted to be prepared.”

Tarsia has joined a growing group of pioneering homeowners, government agencies and businesses using this kind of microgrid to reduce power bills and dependence on utility networks. Spending on microgrid projects in the United States is poised to explode to $19.9 billion in 2020 from $4.3 billion last year, according to Navigant Research, in part because of growing concerns about the reliability of the traditional grid.

“The U.S. is the leading market for microgrids because the quality of our power supply has gone down,” said Peter Asmus, a senior analyst at Navigant Research. “The storms on the East Coast in the last three years have accelerated that trend.”

Online commerce giant eBay Inc. invested in the technology for a data center. Oracle Corp. Chief Executive Larry Ellison and British mogul Richard Branson plan to set up microgrids on their islands. Even the Santa Rita Jail in Northern California has one.

Microgrids are alternative ways of generating, storing and using electricity. Sophisticated versions function as small-scale power systems that pull together different energy sources and can operate independently in an emergency.

Unlike diesel generators, which have long been used for emergency power, modern microgrids frequently integrate batteries with multiple sources of power, including solar panels, wind turbines and natural gas fuel cells.

Interest in microgrids has soared as America's aging infrastructure has fallen behind a rising population that is increasingly hooked on digital gadgets, experts said.

Widespread blackouts from storms or other causes have laid bare the grid's vulnerabilities. In California, a sophisticated attack last year on the Metcalf Transmission Substation near San Jose also raised concerns about the state's power supply.

California has become a big market for microgrids because of the state's aggressive push for renewable energy. State regulators last year mandated that investor-owned utilities — Southern California Edison, San Diego Gas & Electric and Pacific Gas & Electric — must expand their electricity storage capacity by 2020.

Interest is growing because the economics make sense. Solar panel prices have fallen sharply. Recent advances in technology enable microgrids to separate safely from the main utility during outages and use only self-generated electricity. And in normal times, excess energy can be sold back to traditional utilities.

Power-hungry organizations such as corporations and universities can save a lot of money by adopting microgrids, experts said.

The California Institute of Technology generates more than 80 percent of its electricity from on-site sources such as solar, steam and natural gas. The University of California-San Diego saves about $850,000 a month on utility bills through a system of solar panels, fuel cells, generators and batteries, said Byron Washom, the university's director of strategic energy initiatives.

Wal-Mart Stores Inc. is looking into microgrids to keep its stores and warehouses powered in bad weather.

The retail giant never invested widely in diesel generators for its stores because it didn't make sense to shell out for something that might never be used, said David Ozment, Wal-Mart's senior director of energy.

But Wal-Mart has experimented with renewable energy options; 41 stores in California are partially powered by fuel cells that run on natural gas or biogas harvested from landfills. Within two years, the retailer plans to test cells that can power the stores if the main grid goes down, Ozment said.

“The goal is to keep the stores open during blackouts,” he said. “Minimum level of lighting, refrigeration and keeping the cash registers open.”

Smaller users have started adopting microgrids.

Battery sales tripled in the past three years at Wholesale Solar Inc. with orders from places such as doctor's offices and day traders interested in microgrids, said Mark Coleman, president of the Mount Shasta, Calif., company. He said many provide critical services or depend on computers to do their work.

“The stock market trader guys, they say, ‘I can lose the cost of the battery in an hour of not having electricity,' ” he said.

Homeowners are just starting to explore microgrids, but they eventually could drive the industry's growth — especially in areas with high electricity rates such as California, Hawaii and the Northeast, analysts said.

Families with big utility bills can justify the expense more quickly than large institutions, which may have to sink millions into a project, said Brian Carey, the United States clean-tech advisory leader for Pricewaterhouse-Coopers. He predicts that homeowners will go for microgrids in the future at a faster rate than colleges or corporations.

For now, the high cost of batteries is one big hurdle against wider adoption. An at-home unit can cost a few thousand dollars or up to tens of thousands of dollars. The price varies widely depending on how many appliances or gadgets need to be powered and for how long.

A battery that can keep a refrigerator running is significantly cheaper, for example, than one that is required to power electric cars, heat a hot tub and run a home's air conditioner all day.

That is why islands with high electricity rates are at the forefront of microgrid adoption, experts said. Many depend on costly fuel shipments to power their grids and have been quicker to test green energy sources such as solar.

On Branson's Necker Island, in the British Virgin Islands, for instance, electricity can cost up to 50 cents per kilowatt hour, said John Bates, senior vice president of strategic alliances for NRG Solar. That's compared to 14 cents in California and 35 cents in Hawaii, according to the Energy Information Administration.

NRG Energy will begin installing a microgrid this summer integrating a wind turbine, solar panels, generators and batteries on the 74-acre Caribbean island, Bates said. It will eventually meet at least 75 percent of the island's energy needs and significantly reduce power costs by slashing reliance on diesel shipments.

“It can really change the economics of an island and increase independence,” he said.

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